LONDON, May 17 (Reuters) - Mozambique’s restructuring discussions with Russian lender VTB over a loan to the state-owned Mozambique Asset Management (MAM) are in the final stretch, the International Monetary Fund (IMF) said in its latest country report.

The fund also said the devastation from Cyclone Idai which killed more than 1,000 people across Mozambique, Zimbabwe and Malawi in March, had severely hit agricultural production and disrupted transport, slashing growth projections by half for this year.

Mozambique has been battling to recover from a debt crisis after admitting in 2016 to $1.4 billion of previously undisclosed lending, prompting the IMF to cut off support and triggering a currency collapse and debt default. Much of the funds were supposed to be spent on a tuna fishing fleet. VTB had been the lead arranger for a $535 million loan to MAM.

“The authorities are in good-faith discussions with private creditors to restructure Mozambique’s Eurobond and previously hidden loans,” the IMF wrote in the report. “Restructuring discussions with VTB on the MAM loan are almost finalized.”

“Mozambique’s Attorney-General has filed a lawsuit in the UK to nullify the criminally-obtained government guarantee to the loan contracted by ProIndicus, a state-owned enterprise, with Credit Suisse,” the IMF report stated.

Mozambique’s outstanding Eurobond is also due for restructuring and the Finance Ministry announced in November that it had reached an agreement in principle, hoping to finalize this early this year, though little progress seems to have been made since.

CYCLONE IDAI

Assessing the fallout from March’s cyclone, the IMF said damage to infrastructure had severely impacted productive capacity in key economic sectors in the central region.

The IMF predicted real GDP growth would slow to 1.8-2.8% in 2019 from a pre-cyclone projection of 3.8% due to losses to agricultural production and disruption to transport, communications and services.

Meanwhile food shortages in Beira and surrounding regions are expected to raise price pressures, with inflation forecast to accelerate to 8.5% from 5.5%.

Emergency assistance and reconstruction efforts will also ramp up pressure on a tight budget, the IMF said. It expected the fiscal primary deficit after grants to rise to 2.5% of GDP in 2019, one percentage point of GDP higher than projected.

In a letter from Mozambique’s Finance Ministry on April 10 to the IMF, attached to the lender’s report, the government said most homes, hospitals and schools in Beira, one of the country’s major cities, had suffered large-scale destruction.

“The port of Beira, an important trade hub not only for Mozambique but also for Malawi and Zimbabwe, is not operational,” the letter said.

The port operator could not be reached for comment. (Reporting by Karin Strohecker in London, additional reporting by Emma Rumney in Johannesburg and Tatiana Voronova in Moscow; Editing by Janet Lawrence)